USA hits back in battle for Australian commercial property

The United States has re-emerged as a dominant player in Australia’s commercial property market, eclipsing China as the biggest foreign investor so far in 2016.

Already this year US investors have splurged more than $2.68 billion on Australian commercial property, a jump of more than $1.5 billion on the same period in 2015, according to Real Capital Analytics and realcommercial.com.au data.

With big-spending New York private equity giant Blackstone inking deals to buy numerous major properties and portfolios, the US spend dwarfs China’s $1.815 billion worth of Australian deals completed thus far, as other countries also fell away.

To August 9 last year, Chinese buyers had spent $2.585 billion acquiring Australian commercial property.

REA Group economist Nerida Conisbee says re-emergence of the US as a driving force is surprising, given the Chinese dominance in 2015 and predictions it would continue into this year.

“Year to date, the US has invested more than the Chinese – the group that dominated last year,” she says.

“This coincides with the strong economic growth currently being experienced by the US economy.”

“Investment volumes from offshore groups in Australian commercial property are looking similar to where we were at this time last year, however there has been a dramatic re-emergence of the US as a major investor.”

Investors from China are still showing a strong preference for development sites and this is also the preferred investment type for the Japanese

Blackstone’s acquisitions already in 2016 include the $400 million purchase of Adelaide’s Rundle Place shopping centre and the 80 Grenfell St office tower from Epc. Pacific, as well as the lion’s share of the $900 million Vicinity Centres shopping portfolio.

Overall foreign investment this year has dipped to just over $6.9 billion from $7.487 billion at the same time last year.

The United States has moved past China as Australia’s largest foreign commercial property investor.

Conisbee says overseas investors continue to favour offices as their preferred asset class, while development sites are experiencing less demand compared to 2015.

“Office continues to be the preferred investment class for overseas investors in Australia. The top 3 investors, US, China and Singapore all invested the most in this property type,” she says.

“We have also seen a significant decrease in the amount invested in development sites and hotels compared to the same time last year.”

“Investors from China are still showing a strong preference for development sites and this is also the preferred investment type for the Japanese.”